Legislature(1997 - 1998)
04/04/1997 06:25 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 4, 1997 6:25 P.M. TAPES SFC-97, # 77, Sides 1 & 2 (000-590, 590-000) SFC-97, # 78, Side 1 (000-305) CALL TO ORDER Senator Bert Sharp, Cochair, Senate Finance Committee, reconvened the meeting at approximately 6:25 P.M. PRESENT In addition to COCHAIR SHARP, SENATORS PHILLIPS, TORGERSON, PARNELL and ADAMS were present when the meeting was convened. COCHAIR PEARCE arrived as the meeting was in progress. SENATOR DONLEY did not attend the meeting. Also Attending: SENATOR WILKEN, JACK CHENOWETH, Legislative Legal Counsel, Legislative Affairs Agency (LAA); KEN BISCHOFF, Director, Division of Administrative Services, Department of Public Safety; MARYLOU BURTON, Budget Director, University of Alaska; PETER BUSHRE, Chief Financial Officer, Permanent Fund Corporation, Department of Revenue (DOR); MARY SUTTON, Finance Officer, Division of Administrative Services, DOR; GLENDA STRAUBE, Director, Child Support Enforcement Division (CSED), DOR; JOHN MALLONEE, Assistant Director, CSED, DOR; JOHN BITNEY, Legislative Liaison, Alaska Housing Finance Corporation (AHFC), DOR; JOHN CAMPBELL, Financial Officer, AHFC, DOR; PAM VARNI, Executive Director, LAA; STUART HALL, Ombudsman; MIKE GREANY, Director, Legislative Finance Division; fiscal analysts and aides to committee members. SUMMARY INFORMATION SB 13 INCREASE TOBACCO TAXES COCHAIR SHARP noted Amendment #2 had been adopted previously, but a "cleaned up" version from Legal Services was in members' files. Amendment #1 was before the committee. SENATOR TORGERSON MOVED Amendment #1. COCHAIR PEARCE objected. Amendment #1 FAILED by a 2-4 vote. SENATOR ADAMS MOVED to rescind previous action in adopting Amendment #2. Without objection, Amendment #2 was RESCINDED. SENATOR PHILLIPS MOVED the "cleaned up" version of Amendment #2 from Legal Services. Without objection, Amendment #2 was ADOPTED. SENATOR WILKEN addressed the committee regarding Section 4 of the HESS CS. COCHAIR PEARCE MOVED CSSB 13(FIN) from committee, then WITHDREW her motion. SENATOR PHILLIPS MOVED Amendment #3. COCHAIR PEARCE objected. Amendment #3 failed by a 1-5 vote. COCHAIR PEARCE MOVED CSSB 13(FIN) from committee with individual recommendations and appropriate fiscal notes. Without objection, CSSB 13(FIN) was REPORTED OUT with a forthcoming fiscal note from the Department of Revenue. SB 107 APPROPRIATIONS: CAPITAL & FUNDS Testimony was heard on capital budget items from representatives from the Department of Public Safety, the University, Department of Revenue, AHFC, the Legislature and the Ombudsman. SB 107 was HELD for further consideration. SENATE BILL NO. 13 "An Act relating to taxes on cigarettes and tobacco products, and to the use of the proceeds of those taxes; and providing for an effective date." COCHAIR SHARP recapped the previous action on SB 13. He brought attention to Amendment #2, which had been adopted. A new "cleaned up" version of the amendment was in committee files for consideration. SENATOR TORGERSON MOVED Amendment #1. COCHAIR PEARCE objected. SENATOR TORGERSON explained that the amendment puts a question before the voters for approval in the 1998 election. Section 11 refers to the tax reverting back to the general fund if a court challenge were successful regarding dedication of the tax for education. If challenged, the money may be put in escrow, making it unavailable until after the court hearing. This placed it before the voters in a ballot proposition and removed the legal questions in trying to dedicate it. There were opposing opinions regarding the constitutionality of dedicating the tax and this was a third option. In response to a question from SENATOR PHILLIPS, he explained that if the amendment were adopted, there wouldn't be a need for much of the language in Section 11. A roll call vote was taken on the MOTION to adopt Amendment IN FAVOR: Torgerson, Parnell OPPOSED: Phillips, Adams, Pearce, Sharp Amendment #1 FAILED by a 2 to 4 vote. SENATOR ADAMS MOVED to rescind previous action in adopting Amendment #2. Without objection, Amendment #2 was RESCINDED. SENATOR PHILLIPS MOVED Amendment #2, version LS0159/Q.1. Without objection, Amendment #2 was ADOPTED. SENATOR WILKEN addressed the committee. He commented that the Senate Health, Education and Social Services Committee proposed a school construction savings account. Should the tax law be judged unconstitutional, the money would go directly into the general fund. The proposal would be a safety net. It would remove the immediate drop into the general fund and it would address the temporary nature of the tax. If the tax was successful, it would eventually drop to zero. If the money were put into a school savings account, there would be an endowment to construct public schools. He encouraged the committee to consider reinstating the proposal into SB 13. COCHAIR PEARCE MOVED the bill from committee with individual recommendations. SENATOR PHILLIPS questioned SENATOR WILKEN about the proposal. COCHAIR SHARP pointed out that the Finance Committee version removed the automatic CPI escalators. COCHAIR PEARCE withdrew her MOTION. SENATOR PHILLIPS MOVED the section containing the school construction savings fund for discussion purposes, which would be Amendment #4. COCHAIR PEARCE objected. SENATOR ADAMS requested testimony from Jack Chenoweth regarding the constitutionality of dedicating the fund. JACK CHENOWETH, Legislative Legal Counsel, Legislative Affairs Agency, explained the provisions referred to by Senator Wilken. He further explained that the way the Finance Committee CS was drafted, the proceeds of the increase in the cigarette tax would be directly paid into the school fund, a dedicated fund that existed before statehood. If a challenge were entered based on the loss of the dedication because of the increase in the rate of the tax, the increase would go to a non-dedicated fund. COCHAIR SHARP clarified that there was also the ramification that the money going into that account would accumulate, called for inflation proofing, and only the amount left over would be available to spend. MR. CHENOWETH confirmed that. COCHAIR PEARCE appreciated the concerns expressed and supported the tobacco tax, but didn't feel it was necessary to develop a special fund to set aside the money. There was more state money being spent per year to combat the effects of tobacco products than the tax would ever bring in. She didn't believe the legislature should tie its hands more than necessary in terms of how they make spending decisions and did not see a need to include that section in the bill. SENATOR PHILLIPS wanted to make sure that in voting for the tax it went for something other than general funds. He reiterated his motion to adopt Amendment #3. COCHAIR SHARP believed the original dedication would hold up and be used for school construction and maintenance. He stated his opposition to the amendment based on the fact that the money would still be subject to legislative appropriation. There was additional discussion and clarification about the effect of the amendment. A roll call vote was taken on the MOTION to adopt Amendment IN FAVOR: Phillips OPPOSED: Parnell, Adams, Torgerson, Pearce, Sharp Amendment #3 FAILED by a 1 to 5 vote. COCHAIR PEARCE MOVED the bill from committee with individual recommendations. Without objection, CSSB 13(FIN) was REPORTED OUT with a forthcoming fiscal note from the Department of Revenue (41.5). SENATE BILL NO. 107 "An Act making and amending capital and other appropriations and to capitalize funds; and providing for an effective date." COCHAIR SHARP announced that the committee would hear first from the Department of Public Safety. KEN BISCHOFF, Director, Division of Administrative Services, Department of Public Safety testified that their capital projects were typical of what they submit every year. The first, on page 17, line 15, for Fish and Wildlife Protection aircraft and vessel maintenance was for annual maintenance and operation of 43 aircraft and 19 marine vessels. The next project was for replacement of outboard motors, skiffs, snow machines, marine radar, etc. The third project was equipment for Alaska State Troopers. Next was a data base system to capture demographic and program data for domestic violence and sexual assault. Line 21 was a request to replace the fingerprint system that had been declared obsolete. COCHAIR SHARP brought up the University next. MARYLOU BURTON, Budget Director, University of Alaska, noted the first item that affected the university was in the front section of the bill, Section 11. The intent was to allow the university some flexibility to carry forward a limited amount of funds for renewal and replacement projects that don't fall within the confines of a fiscal year. They had been working with OMB to develop a mechanism to do this and it was a step in that direction. Since the time the bill was drafted, they implemented a RIP program and reevaluated current year needs and didn't anticipate they would lapse any general funds and exercise the provision. If they did, it would be to a limited degree. SENATOR ADAMS inquired what number they would like the committee to utilize. MS. BURTON thought the maximum they could lapse would be $100 thousand, but if the provision were eliminated, she didn't believe it would affect the university. The remainder of items were on page 29. The first on line 15 for $7 million was for deferred maintenance, code compliance and renovation. There was still a backlog of $165 million in deferred maintenance and it was the highest priority. She had copies of the university's project priority list for distribution to the committee. Next was $1.5 million for development of the $33 million International Arctic Research Center. She noted that sixty percent of funding for the facility was coming from the Japanese government, the balance would come from the federal government, private sources, prior general fund appropriations and university revenue bonds. The appropriation would bring the university receipt authority up to a level necessary to receive and expend the full contribution of the Japanese government. The last item was on line 19, a request of $450 thousand for the small business development programs at UAA. Until last year, these funds were channeled through the Department of Commerce and Economic Development, but last year and this year it is being funneled directly to the university through the governor's budget. The difference this year was that the funding would come from AIDEA. COCHAIR SHARP brought up the Department of Revenue next. PETER BUSHRE, Chief Financial Officer, Permanent Fund Corporation, Department of Revenue (DOR) described the request of $190 thousand on page 17, line 23, for integration of office space with new office space being developed. End SFC-97 #77, Side 1, Begin Side 2 MR. BUSHRE added that the project would be paid from corporate receipts. MARY SUTTON, Finance Officer, Division of Administrative Services, DOR, pointed out the next item on line 25, that being the department's computer security system project. The purpose was to reduce the threat of unauthorized access to various systems containing sensitive information. GLENDA STRAUBE, Director, Child Support Enforcement Division (CSED), DOR, and JOHN MALLONEE, Assistant Director, CSED, DOR, spoke of the next project on line 26. The project was in response to the requirements of the welfare reform law, which provides federal matching funds to help states further develop existing computer systems to comply with the many new requirements under the act. It was a three part project consisting of developing two data bases that will feed information into national data bases. One was a national child support case registry, the other was a new hire directory of all employees hired in the state. They were contracting with the Department of Labor on the latter. He gave additional information on the projects and the amount of staff hours that would be saved. COCHAIR SHARP brought up Alaska Housing Finance Corporation next. JOHN BITNEY, Legislative Liaison, and JOHN CAMPBELL, Financial Officer, AHFC, DOR, addressed the committee first by pointing out that AHFC will provide the state approximately $130 million for transfers to the treasury and capital projects in FY 97. They are requesting $34.8 million in corporate receipts for capital projects, along with $16.1 million in federal matching funds for housing programs within AHFC. Most projects are for housing needs for seniors, handicapped and low-income people, and facility maintenance. A detailed report of the individual requests was provided to the committee and is on file. COCHAIR PEARCE commented that last year the legislature made a designated grant to AHFC for the Alaska Craftsman Home Program. AHFC chose to ignore it and spent it at their will. She indicated that as long as the agency is going to ignore the legislature's appropriations she did not intend to appropriate any money to AHFC. MR. BITNEY responded that there had been such a grant and at the time the governor signed the capital bill, he requested that AHFC follow the procedures outlined in statute for designated grants which allows the agency to solicit other proposals, which AHFC proceeded to do. During the process, AHFC recommended the Alaska Craftsman Home Program be awarded the funds as appropriated. Meanwhile, AHFC has been working to get a plan from them for what they intend to do with the funds, some funds have been advanced to date. The designated funds were federal so they were restricted in use and they requested a work plan that conformed with the restrictions placed by the federal Department of Energy. COCHAIR PEARCE questioned why it had suddenly become so different because the entity had received designated grants through the same process over a number of years without any question of meeting the federal requirements. MR. BITNEY explained that there had not been monitoring of the program in the past. AHFC initiated a grant review program of all grantees, but was unsure of what problems existed. He noted AHFC would be making a $300 thousand request for the program for FY 98, which would be put out to competitive bid. MR. CAMPBELL began with the first AHFC project on page 18, line 5, that being Central Terrace/Fairmont Phase I in Anchorage, to dispose, replace and renovate about 187 units of low rent housing. They intend to sell 100 of the units and use the proceeds to supplement the renovation of the remaining units. SENATOR PHILLIPS queried where the units were in Anchorage. MR. CAMPBELL responded that they were primarily four-plex units scattered throughout the Fairview and Mountainview communities. The next project was on line 7 for their computer mainframe renovation and upgrades. It would provide lower maintenance costs and greater storage capacity with a smaller unit that could be upgraded in the future. MR. BITNEY explained further. The Homeless Assistance Program was next and considered one of the states most critical needs to help communities and agencies develop programs to prevent homelessness. It was comprised of three components. SENATOR PARNELL requested additional description of the components and MR. CAMPBELL complied. There was additional discussion about the components, homelessness, the definition of near homelessness, and anticipated shortfalls in federal assistance. Line 10 featured a project comprised of two components: Low- Income Weatherization and Residential Energy Rehabilitation. MR. CAMPBELL detailed the components. COCHAIR SHARP inquired if there was a required match for federal receipts, to which MR. CAMPBELL replied there was not. MR. CAMPBELL next spoke of the Supplemental Housing Development Program on line 11. It would use corporate funds to supplement anticipated HUD funds of approximately $40 million for safe and sanitary housing. There were additional questions and discussion about projects on a list provided by AHFC to the committee reflecting what was applied for but not funded last year. MR. BITNEY informed the committee that they were largely projects in remote communities. There was some discussion about projects in Metlakatla. The next project was on line 12 using corporate receipts for Public Housing Environmental Cleanup and Abatement for underground storage tank removal, asbestos removal and environmental assessments. SENATOR TORGERSON questioned if the environmental assessment was contracted. MR. CAMPBELL responded that it was. There was an environmental specialist that supervises the work being done. Senior and Statewide Deferred Maintenance using corporate receipts was the next project. It was partially matched with federal funds of $988.9 thousand. It was part of an ongoing ten-year plan which will continue for the next two or three years. In response to a question from COCHAIR SHARP, MR. CAMPBELL stated there was no minimum requirement of state money to match the federal funds. Spruce Park Renovation of public housing on line 16 was next, entailing disposition of 18 units, demolition and replacement of 30 units. MR. CAMPBELL described the project in further detail. COCHAIR SHARP requested he advise staff if the project could be a two-phase development. The Senior Housing Development Fund Program would use corporate funds to make grants to municipalities and other agencies for the development of senior citizen housing. They would be used for the purchase of building sites, site preparation, materials, construction and rehabilitation. Awards would be made on a competitive basis. In response to a question from SENATOR TORGERSON, MR. CAMPBELL stated that they were requesting $3.3 million, but there were $3.6 million of projects that had been applied for, and would have to be resubmitted. Next was a project using $3.1 million of federal funds for the HUD Comprehensive Grant program to help renovate and modernize public housing units, provide for administrative expenses, education projects, drug elimination and safety projects and management improvements. The HUD Federal HOME Grant followed on line 21. It was a required match program with $750 thousand in corporate funds and $3 million of federal funds for safe, energy-efficient and affordable housing for low-income families. Line 23 featured a request of $1.5 million of corporate funds and $3 million of federal funds for federal and other competitive grants that target housing for low-income and special needs groups such as senior citizens, mentally ill, disabled and homeless people. It would also apply for energy grants related to housing. Match requirements would vary among different federal programs. The Oil Overcharge Restitution program of $2.5 million were federal funds received from court settlements against oil companies who overcharged in the early seventies. The funds were for restitution to the public through programs approved by the Department of Energy for various energy conservation activities and would be awarded competitively. Competitive Grants for Public Housing on Line 26 was federal and corporate match funds in which AHFC would apply for HUD grants that target low-income and special needs groups, crime prevention and substance abuse in public housing, and assistance to help families attain economic self- sufficiency. The Energy Conservation Retrofit program was an ongoing program to use corporate funds to increase energy efficiency in public housing units and lower utility expenses. MR. CAMPBELL described the types of improvements. On Line 28 was the Alaska Craftsman Home Program. It focused on training builders, energy raters and consumers in northern building science and the development of related education materials to encourage high energy standards in building. The grants were to be competitively awarded on a bi-yearly basis contingent on annual appropriations. The last project was the Energy Rated Homes of Alaska program, which would use corporate funds of $300 thousand to promote energy-efficient construction throughout the state and awarded the same as the above project. End SFC-97 # 77, Side 2 Begin SFC-97 #78, Side 1 MR. CAMPBELL continued with his presentation with a brief discussion about the restricted use of federal funds from the Department of Energy. This year they brought the programs into corporate receipt categories and will make them available on an RFP basis to qualified groups. COCHAIR SHARP referred to the last three items on page 18, stating that they should fit under the Stripper well funds. MR. CAMPBELL responded that the activities would fit under the program, but would only apply to AHFC properties, whereas the Stripper well funds were to be made available to all Alaskans. There was additional discussion about restrictions on the three items and categories under the Stripper funds. COCHAIR SHARP stated that beside the projects just discussed, another $18 million of corporate receipts had been proposed for other agency budgets, for a total of $53 million of corporate receipt expenditures. That was $20 million over the long range forecast limitation and may require a reduction. In response to a question from SENATOR PARNELL, MR. CAMPBELL discussed dispersement and availability of funds from the Federal Competitive Grants program. SENATOR PARNELL requested additional back-up information on the topic. MR. BITNEY clarified that the $70 million that was shown in the revenue forecast counted the $50 million dividend and $27.6 million of assets from the state mortgage insurance fund. Added to that was the $53 million in expenditures for capital projects, which brought the figure up to $130 million. SENATOR ADAMS inquired about the maximum figure of corporate funds that the finance committees could use. MR. BITNEY responded that the total of $130 million would allow them to meet their debt obligations and maintain their credit worthiness. COCHAIR SHARP announced the legislature's capital budget would be presented by Pam Varni. PAM VARNI, Executive Director, Legislative Affairs Agency, listed ten projects for the capital and supplemental budgets. First was $55 thousand for completion of rewiring for the ethernet project in the capitol building for legislative offices. Second was $75 thousand for BASIS analysis and design for the wide area network (WAN), to get independent of the state mainframe. Third was $98 thousand for conversion of the WAN, to save up to $120 thousand per year. Fourth was $110 thousand for replacement of seven copiers in Juneau, Anchorage, Homer and Fairbanks. The fifth item was $38.3 thousand for teleconference equipment replacement. The sixth project was $12.5 thousand for window glass replacement in the capitol. Seventh was $10 thousand for re-roofing above the capitol steps. Eighth was $10 thousand for routine outside brick replacement and maintenance of the capitol. Ninth was $134.5 thousand for replacement of the print shop collator. The last project was $33 thousand to replace the e-mail system and make it compatible with the executive branch. STUART HALL, Ombudsman, described a two-element capital project request of $100 thousand. One was development of a PC-based software program for case management for $50 thousand. The other was replacement of existing computer servers with hardware capable of handling the case management software. The replacement of the outdated software and hardware was expected to save maintenance costs, streamline, modernize and simplify the system for staff as well as public access. He hoped to have the ability to provide data by legislative district and provided additional details. COCHAIR SHARP announced the agenda for tomorrow. He noted that the only remaining capital project overview was for DOTPF. ADJOURNMENT The meeting was adjourned at approximately 8:20 P.M.